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Lecture 8

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Economics (Arts)
ECON 208
Paul Dickinson

Lecture 2 Two-Sided Platforms. What is a two-sided platform? The majority of new business models on the internet are actually two- sided platforms. These are sometimes referred to as two-sided networks or two-sided markets. A two- sided platform is one where two groups interact over a common platform or market. In the Keurig Case, we thought hard about how to price strategically with lock-in. Generally, there are large ties between markets which have ‘lock-in’ or razor-blades pricing and markets that are two-sided platforms. For example, Keurig would have been a two-sided platform if it just acted as an intermediary for the roasters and the customers and did not attempt to sell coffee itself. The key difference in markets where there is just lock-in is that the customer’s decision to purchase a product gives the firm purchasing power over him. By contrast, in a two-sided platform, the customer’s decision to purchase a product also gives the network operator power over the purchasing decisions over those on the other side of the network. There are three major different kinds of two-sided platforms. (1) Exchanges. These are typically networks that bring together disparate groups of buyers and sellers. • Examples include, a Mall, (2) Software systems. Generally the platform is the operating system, and the two groups are computer users and program developers. • Linux, Windows • XBox, Playstation (3) Content-Based Markets. These are markets, such as newspapers, where on one side there are advertisers and on the other side users who want access to the content. • The content can be user generated like on Facebook. • Orit can be generated by the website
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